Against Intellectual Monopoly

rather than limit
competition. This, in particular, is a form of copyright we would like to see
preserved and extended to patents. Indeed, and limited to the Linux software
area, this is pretty much what the Open Initiative Network mentioned earlier
strives to achieve.
    On the opposite side of the coin, economists often argue that, in the
absence of government enforcement of contracts, a contracting black market
may arise. An example is the prohibition of usurious lending contracts that
limit the charging of high interest rates and limit also the penalties that can
be contracted for in the case of failure to repay. Naturally, an illegal market
has sprung up - and organized criminals are happy to lend you money
without security at very high interest rates, and then come and break your
knees if you fail to repay. From a social point of view, the contracts have
not been eliminated - but simply pushed out of the civilized world and
made the object of persecution by the law-and-order system. Would not
something similar happen if the government were to stop enforcing shrinkwrap agreements? The answer is probably not. Antitrust law has not created
much of a market for breaking the knees of competitors who fail to collude -
and however much the RIAA and MPAA might like to break the knees of
those who leak copyright material on to the Internet, they have not had
much success in finding them.
    Overall, we do not favor the extreme approach of the government actively
trying to enforce competition - we favor abolition, including the government refusing to enforce collusive downstream licensing contracts. We
would not oppose the private enforcement of licensing contracts, as long as
knees and backbones are not allowed to become the channels of enforcement. For example, in the television and movie industry, authorship and
profit share is established not according to copyright law, but according
to a private contract between the studios and the writers' unions. Without intellectual property, such a contract could not be enforced in court -
but it could be enforced, for example, by the writers going on strike or by
the studios locking out the writers union. This is not necessarily a good
thing from an economic perspective. However, it is very costly for the government to become involved in preventing private contract enforcement;
hence, private, nondisruptive enforcement may be the lesser of the two evils. Moreover, this type of enforcement, unlike government enforcement,
is self-limiting. That is, the studios can always accept the strike and find
replacement authors, and the authors can always start studios of their own.
Because some downstream monopoly may serve a good social purpose, it
seems a poor idea to try to control this type of self-limiting enforcement.

Pharmaceuticals
    Handling properly the pharmaceutical industry constitutes the litmus test
for the reform process we are advocating. Simple abolition, or even a progressive scaling down of patent terms, would not work in this sector for the
obvious reasons outlined in the previous chapter. Reforming the system of
intellectual property in the pharmaceutical industry is a daunting task that
involves multiple dimensions of government intervention and regulation
of the medical sector. Although we are perfectly aware that knowledgeable readers and practitioners of the pharmaceutical and medical industry
will probably find the statements that follow utterly simplistic, when not
arrogantly preposterous, we try nevertheless. That this is just a two-page
subsection in a book is, we understand, a paltry excuse but a true one
nevertheless. In sequential order, here is our list of desiderata.
    • Free the pharmaceutical industry of the stage 2 and 3 clinical trials costs,
which are the really heavy ones. Have them financed by the National
Institutes of Health (NIH) on a competitive basis: pharmaceutical
companies that have completed stage 1 trials submit applications to
the NIH to have stages 2 and 3 financed. In parallel, medical clinics
and university hospitals submit competitive bids to the NIH to have
the approved trials assigned to them. Match the winning drugs to
the best bids, and use public-choice common sense to minimize the
most obvious risks of capture. Clinical trial results become public
goods and are available, possibly for a fee covering administrative and
maintenance costs, to all who request them. This would not